An International Monetary Fund (IMF) mission visited Jamaica during February 5-13, 2014 to conduct discussions on the third review of Jamaica’s IMF-supported program under the Extended Fund Facility (EFF). The mission met with the Minister of Finance, Hon. Peter Phillips, Bank of Jamaica Governor Brian Wynter, Financial Secretary Devon Rowe, senior government officials, as well as representatives of the private sector and civil society.
At the conclusion of the mission, Mr. Jan Kees Martijn, the Fund’s mission chief for Jamaica, issued the following statement in Kingston:
“The Fund mission reached preliminary understandings with the authorities on a set of economic policies detailed in an updated Letter of Intent. Discussions with the authorities focused on economic performance under the program and policies for the remainder of the program period.
“Economic activity is tentatively estimated to have expanded by about 1.4 percent year-on-year in the last quarter of 2013, while consumer price inflation moderated to 9.7 percent in December. The current account has shown an ongoing improvement, and net international reserves increased to more than US$1 billion by end-December (with gross reserves at US$1.8 billion, equivalent to more than three months of imports). The execution of the 2013/14 budget has been broadly on track, notwithstanding shortfalls in tax revenues owing to weak demand.
“Overall policy implementation under the program remains strong. All quantitative performance targets and indicative targets for end-December were met, including the floor on social spending. All structural benchmarks to date have also been met. For 2014 and beyond, the critical challenge remains to support economic growth, while continuing to undertake the necessary fiscal adjustment. Key elements of the authorities’ updated program include:
• Actions to promote growth by improving competitiveness and the business climate and pursuing strategic investments, supported by the World Bank and the Inter-American Development Bank. Priority reforms will include a new on-line process for business registration, streamlining the development application approval process and putting in place a tracking system, projects to reduce the cost of electricity, and reforms to enhance access to credit and make the labor market more flexible;
• The next steps for tax policy reform. Forthcoming amendments to the General Consumption Tax Act will include eliminating the zero-rating for government purchases. Reform of property taxes is envisaged to be ready by the start of FY2015/16;
• The implementation of an action plan to modernize tax and customs administration, with a stronger Large Taxpayers Office, improved IT systems and performance measurement, and actions to lower the cost of compliance for taxpayers and towards trade facilitation;
• The establishment of an effective fiscal rule to enhance fiscal transparency and lock in the gains from fiscal consolidation. The aim is to limit the annual budget deficits of the public sector so as to achieve a reduction in public debt to no more than 60 percent of Gross Domestic Product (GDP) over the longer term and control fiscal risks. Legislation for the new fiscal rule is expected to be passed by Parliament before the start of the next fiscal year;
• Further developing the financial system, including by strengthening the legal and regulatory framework applicable to the securities dealers sector;
• Strengthening the social protection framework, with enhanced efforts to move recipients from welfare to work.
“These preliminary understandings are subject to approval by the IMF’s Management and Executive Board. Provided that performance remains strong, Board consideration of the third review of Jamaica’s IMF-supported program under the EFF could take place in March. Upon approval, SDR 45.95 million (about US$71 million) would be made available to Jamaica.
“The mission would like to thank the authorities and technical staff for their excellent cooperation.”